The Tax Bracket Manager – How to use it

Here is what you need to do:

1. Go to Tax Bracket Manager
2. Open your 2021 tax return
3. Select your filing status for 2021 and 2022
4. Enter the numbers from the 2021 tax return on the corresponding line of The Tax Bracket Manager
5. Once completed scroll down to the “TOTAL INCOME TAX” line – if you’re within $10 of your tax return number then you’re done!
   • If you don’t match, review your data entry.
   • It’s common to not enter tax-exempt interest, qualified dividends, or long-term capital gains correctly.
6. Enter any adjustments between 2021 and 2022
   • Example: You retired in 2021. In 2022 you won’t have your $100,000 salary and will start receiving $100,000 from your pension.
     • Enter -100,000 for Wages and Salaries to reduce 2022 to $0
     • Enter 100,000 on the Pensions and Annuities line to increase 2022 to $100,000

COMMON ISSUES:

1. Income tax doesn’t tie
   • If you’re off $10 or less then see the FAQ below.
   • If it’s more than $10 then check out your data entry for QUALIFIED dividends and SHORT-TERM vs LONG-TERM capital gains. Qualified dividends and long-term capital gains fall into different buckets.
2. Medicare Tax – By default the program always includes interest, qualified dividends, and long-term capital gains.
   • This isn’t always true – sometimes there should be more included (i.e. rental income) or less included (i.e. active business income)
3. It doesn’t include tax credits or other taxes (ex: self-employment tax)
   • If your self-employment income is expected to be similar then enter the same as last year.
   • If your self-employment income will vary then send me an email. If I get enough requests I will add that feature.

FREQUENTLY ASKED QUESTIONS:

• After completing data entry the Tax Bracket Manager is a few dollars different than the actual tax return. What should I do?
  • Expect a +/- variance between the tax calculator and the tax return. If it’s more than $10 then double check your data entry. If it’s $10 or less then it’s due to rounding.
  • Note – Any tax credits on the tax return will not be reflected in the calculator.
• Where do I enter information from Schedules 2 and 3? What about dependent credits?
  • The Tax Bracket Manager focuses on tax bracket management. It does not account for credits. This is because the focus is federal tax bracket management.

• When I open the calculator the prior client facts are still present. Do I have to manually delete each number?
  • Platinum and Premium members are allowed to store their most recent entries in their browser. This is a safety net feature if your window closes before finishing. Before starting a new client make sure you select the “Reset” button at the bottom to clear prior entries.
• Where do I enter sales taxes as a non-income state resident?
  • Sales taxes and personal property taxes should be entered with “State and Local Taxes” as one lump sum
• The qualified business income deduction isn’t automatically calculated. What should I do?
  • The QBI deduction is on my to-do list as a future enhancement. If this is a material number (i.e. >$3,000) then send me an email and I’ll help with a short-term fix
• On the 10-year tax projection worksheet the itemized deductions can’t be adjusted. Will this be fixed in a future update?
  • Yes, this is on the list to fix. In the short-term I suggest saving a PDF copy of your original analysis then adjust the new itemized deduction on the Tax Bracket Manager tab. You can then compare the different results.
• When using the Roth Conversion Analyzer why is there still an amount remaining below the top of the tax bracket target?
  • The Tax Bracket Manager rounds the automatic calculation for Roth Conversions rounds the conversion amount. This is because in practice we will convert a round number with a margin of error.
  • Note – in some complex situations the total rounding might lead up to a $2,000 variance to the top of the tax bracket. This is usually when your tax calculation deductible medical and/or charitable contributions tied to the AGI limit. The combination of all the moving parts makes the auto calculation difficult to program.
• Is there a place to enter private organization donations?
  • The calculator currently supports 100%, 60%, 50%, and 30% AGI donations to 50% limit organizations. This may be a future enhancement.

Let me know what you think. I’ll move up fixes based on feedback.